Regulation Fd and Market Behavior Around Earnings Announcements: Is the Cure Worse than the Disease?
30 Pages Posted: 28 May 2002
Date Written: July 2, 2002
Abstract
We assess the impact of Regulation Fair Disclosure (Reg FD) by examining market and analyst forecast behavior around earnings releases. After the implementation of Reg FD, stocks experience declines in event period return volatility, increases in event period trading volume due to differential informed judgment or difference in opinions, and increases in pre announcement forecast dispersion. Additional tests suggest increases in disagreement and differences of opinion among analysts after implementation of Reg FD. Thus, Reg FD is significant, though not necessarily beneficial. In particular, the regulation appears to impair the ability of the market to reach consensus.
Keywords: Regulation FD, Fair Disclosure, earnings announcements, market reaction, event study
JEL Classification: G18, G14, K22
Suggested Citation: Suggested Citation
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